US pending home resales up in March

Bloomberg

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The number of Americans signing contracts to buy previously owned homes jumped in March for the first back-to-back gain in almost a year, reinforcing signs that the housing slump in its fourth year may be near a bottom.

The 3.2 percent gain in the index of signed purchase agreements, or pending home resales, compared with a 2 percent increase in February, the National Association of Realtors said Monday in Washington. The March reading of 84.6 was 1.1 percent higher than the 83.7 level in the same month a year earlier.

Foreclosure-driven declines in values and lower mortgage rates are putting homes within reach for more Americans, potentially charting a path out of the housing recession that’s now in its fourth year. The report sent benchmark stock indexes to levels not seen since January and indicated that tax breaks for first-time buyers and efforts to thaw credit are paying off.

"Confidence has improved," said James O’Sullivan, a senior economist at UBS Securities in Stamford, Connecticut. "People are worrying a bit less about a depression and starting to see signs of recovery, and that means you’re going to see more people jump into the market."

Economists forecast the index would be unchanged, according to the median of 32 projections in a Bloomberg News survey. Estimates ranged from a 2.3 percent drop to an increase of 3.5 percent.

A leading indicator

Pending resales are considered a leading indicator because they track contract signings. NAR’s existing-home sales report tallies closings, which typically occur a month or two later. The group, whose pending data goes back to January 2001, started publishing the index in March 2005.

Separately, the Commerce Department said on Monday that spending on U.S. construction projects unexpectedly rose in March for the first time in six months as increases in commercial and government projects overshadowed a continuing drop in home building. Private construction of single-family homes was down 52 percent from a year earlier, Commerce said.

Two of four regions saw an increase in pending resales, the report showed. Pending resales rose 8.5 percent in the South and 3.9 percent in the West, while falling 5.7 percent in the Northeast and 1 percent in the Midwest. Other reports point to some stabilization in the housing market. The decline in home prices in 20 major U.S. cities slowed during February for the first time since 2007, the S&P/Case-Shiller index showed on April 28. Also, sales of previously owned homes in March held above a decade-low reached two months earlier, NAR, the realtors group, said April 23.

Government efforts to lower borrowing costs and unclog lending may be starting to pay off. The average rate on a 30-year fixed mortgage fell below 5 percent for the second time on record in the week ended March 19 and has held below that since. The rate reached a record low of 4.78 percent in the week ended April 2.

NAR’s affordability index, which tracks mortgage rates, home prices and incomes, surged in February to the highest level in 20 years of data. The Federal Reserve last week refrained from increasing purchases of Treasuries and mortgage securities, indicating policy makers believe the worst of the recession has passed.